MARKET EQUILIBRIUM

Equilibrium Price The way in which forces of supply and demand determine prices can be shown on a graph.

Equilibrium Price Equilibrium Price – The price where supply and demand are equal. This is also known as the Market Clearing Price. This is because the amount supplied in the market is completely bought up by the consumers.

Total Revenue Total Revenue= Price x Quantity Now we can determine Total Revenue at the Equilibrium Price.

Shifts in Demand If there is an increase in demand, the demand curve shifts to the right. If there is a decrease it will shift left. This will change the equilibrium price. Shift right; The price goes up. Shift left; the price goes down.

Shifts in Supply If there is an increase in supply the supply curve will shift to the right. If there is a decrease it will shift left. This will change the equilibrium price. Shift right; The price goes down Shift left; The price goes up

Shifts in Supply Page 21 Question 2

Excess Demand Where demand is greater than supply and there are shortages in the market.

Excess Demand

Excess Supply Where supply is greater than demand and there are unsold goods in the market.

Excess Supply